9. Implied interest rate and period Consider the case of the following annuities, and the need to compute either their expected rate of return or duration. Joshua inherited an annuity worth $6,830.77 from his uncle. The annuity will pay him eight equal payments of $1,100 at the end of each year. The annuity fund is offering a return of Joshua's friend, Willie, has hired a financial planner for advice on retirement. Considering Willie's current expenses and expected future lifestyle changes, the financial planner has stated that once Willie crosses a threshold of $1,387,311 in savings, he will have enough money for retirement. Willie has nothing saved for his retirement yet, so he plans to start depositing $25,000 in a retirement fund at a fixed rate of 6.00% at the end of each year. It will take v for Willie to reach his retirement goal.

9. Implied interest rate and period Consider the case of the following annuities, and the need to compute either their expected rate of return or duration. Joshua inherited an annuity worth $6,830.77 from his uncle. The annuity will pay him eight equal payments of $1,100 at the end of each year. The annuity fund is offering a return of Joshua's friend, Willie, has hired a financial planner for advice on retirement. Considering Willie's current expenses and expected future lifestyle changes, the financial planner has stated that once Willie crosses a threshold of $1,387,311 in savings, he will have enough money for retirement. Willie has nothing saved for his retirement yet, so he plans to start depositing $25,000 in a retirement fund at a fixed rate of 6.00% at the end of each year. It will take v for Willie to reach his retirement goal.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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John has invested in an annuity policy fund which requires him to place an annual deposit of $10,000 for the next 20 years. During this period, an interest rate of 10% p.a. will be earned for the first 5 years, followed by an interest rate of 8% p.a. for the next 5 years and 6% p.a. for the remaining years. Compute the accumulated amount at the end of 20 years. Please answer fast i give you upvote.
Suppose you have estimated that you will need $2,500 per month in your retirement to meet your expenses and live comfortably, and that you have found or chosen a fund (account) which pays monthly interest 4% APR . What principal, or balance, will your account need to maintain in order to be able to pay you this amount each month? Round/take your answer to the nearest cent.
A friend is celebrating her birthday and wants to start saving for her anticipated retirement. She has the following years to retirement and retirement spending goals. Years until retirement: 30 Amount to withdraw each year: $120,000 Years to withdraw in retirement: 25 Interest rate: 7.5% Because your friend is planning ahead, the first withdrawal will not take place until one year after she retires. She wants to make equal annual deposits into her account for her retirement fund. Required: If she starts making these deposits in one year and makes her last deposit on the day she retires, what amount must she deposit annually to be able to make the desired withdrawals at retirement? Suppose your friend just inherited a large sum of money. Rather than making equal annual payments, she decided to make one lump-sum deposit today to cover her retirement needs. What amount does she have to deposit today? Suppose your friend’s employer will…
Mr. Chew, a retiree, expects to live for the next 20 years and would like to receive a regular retirement income by purchasing an immediate annuity. His desired retirement income is $24,000 per year. The regular pay out is paid immediately on purchase of the annuity. The projected rate of return of the annuity product is 2.5%. To purchase the annuity today, how much Mr Chew would require a lump sum of?
Suppose you wish to invest in an annuity so that you will have $120,000 at some future date for your child’s education. You call several institutions and find that the best interest rate is 5.85% compounded monthly. In addition, you wish to make $350 monthly installments, with payments made at the end of each period. If you expect to attain this goal and give your child the $120,000 by his/her 18th birthday, about how long after he/she is born do you need to start investing in the annuity? Type an explanation and/or the calculations used to arrive at your answer. Construct the payment schedule for the first 6 payments by filling in the table below: period interest cum. int. principal balance 0 1 2 3 4 5 6
Cyrus deposits $744.88 each quarter into an annuity account for his child's college fund. He wishes to accumulate a future value of $75,000 in 18 years. Assuming an APR of 3.6%, how much of the $75,000 will Cyrus ultimately deposit in the account, and how much is interest earned? Round your answers to the nearest cent, if necessary.
Reuben has decided to invest to help with his retirement savings. How much would he have to invest to have $113,400 after 19 years, assuming an interest rate of 3.43% compounded quarterly?
Your friend has a trust fund that will pay her the following amounts at the given interest rate for the given number of years. Calculate the current (present) value of your friend’s trust fund payments. (Click here to see present value and future value tables) Amount ofYearly Receipt Rate Time Current Value $6,400 10% 6 years $fill in the blank 1 $12,000 12% 10 years $fill in the blank 2 $17,500 5% 14 years $fill in the blank 3 $22,000 15% 15 years $fill in the blank 4
Please help me answer the following time value of money question. Michael makes a $500 investment. At the end of 5 years, he has 700. Assuming that the interest is compounded monthly, what is the interest rate earned on his investment?
Andrea, a self-employed individual, wishes to accumulate a retirement fund of $400,000. How much should she deposit each month into her retirement account, which pays interest at a rate of 5.5%/year compounded monthly, to reach her goal upon retirement 35 yr from now? (Round your answer to the nearest cent.)
A couple is saving for retirement with three different accounts. The table below shows the current balances in their accounts, along with their yearly contribution, and the yearly return on each account. The couple will retire in 23.04 years and pool the money into a savings account that pays 3.09% APR. They plan on living for 28.39 more years and making their yearly withdrawals at the beginning of the year. What will be their yearly withdrawal? Yearly Contribution Account Fidelity Mutual Fund Vanguard Mutual Fund Employer 401k Balance $24,614.86 $183,591.46 $306,050.80 $1,000.00 $10,000.00 $15,000.00 APR 6.06% 7.55% 5.06%
Elijah James is in his early 30s and is thinking about opening an IRA. He can't decide whether to open a traditional/deductible IRA or a Roth IRA, so he turns to you for help. To support your explanation, you decide to run some comparative numbers on the two types of accounts; for starters, use a 30-year period to show Elijah what contributions of $5,000 per year will amount to (after 30 years) if he can earn, say, 12 percent on his money. Round your answers to the nearest dollar. 1A. traditional IRA $___1B. Roth IRA $ _____ Will the type of account he opens have any impact on this amount?-Select: YES OR NO Assuming that Elijah is in the 25 percent tax bracket (and will remain there for the next 30 years), determine the annual and total (over 30 years) tax savings he'll enjoy from the $5,000-a-year contributions to his IRA. Contrast the (annual and total) tax savings he'd generate from a traditional IRA with those from a Roth IRA. If an answer is zero, enter "0". Round your answers…

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